What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-12 compared with 2021-05-13 · 389 added, 589 removed, 215 unchanged (82% of the section changed)

3 unchanged sentences

(in thousands)

2021 December 31,

Current assets:

Cash and cash equivalents $ 67,155 $ 177,912

Marketable securities 57,357 —

Accounts receivable, net 4,377 3,901

8 unchanged sentences

Intangible assets, net 44,279 21,490

LIABILITIES & STOCKHOLDERS’

Goodwill 108,740 62,951

Other assets 694 301

TOTAL ASSETS $ 452,847 $ 354,734

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:

12 unchanged sentences

Total liabilities 88,994 37,737

Stockholders’

Stockholders’ Equity:

Common stock 60 57

Additional paid-in capital 353,575 319,582

Retained earnings (deficit) 10,218 ( 2,642 )

Total stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

The accompanying notes are an integral part of

these Condensed Consolidated Financial Statements.

Total stockholders’ equity 363,853 316,997

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 452,847 $ 354,734

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except per share amounts)

For the Three Months Ended

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Sales $ 125,885 $ 43,451 $ 215,907 $ 76,433

Cost of sales 90,172 31,866 154,817 55,902

Gross profit 35,713 11,585 61,090 20,531

Operating expenses:

3 unchanged sentences

Total operating expenses 26,104 8,776 43,745 19,839

Net income (loss) from operations

Income from operations 9,609 2,809 17,345 692

Other income (expense):

Miscellaneous (expense) income

Other expense ( 8 ) ( 66 ) ( 46 ) ( 61 )

Interest income 36 — 40 25

Interest expense ( 4 ) ( 13 ) ( 6 ) ( 20 )

Total non-operating (expense) income, net

Net income (loss) before taxes

Total non-operating income (expense), net 24 ( 79 ) ( 12 ) ( 56 )

Net income before taxes 9,633 2,730 17,333 636

Provision for income taxes ( 2,920 ) ( 156 ) ( 4,473 ) ( 156 )

Net income (loss)

Net income $ 6,713 $ 2,574 $ 12,860 $ 480

Net income per share, basic $ 0.11 $ 0.07 $ 0.22 $ 0.01

2 unchanged sentences

Weighted average shares outstanding, diluted 60,223 41,016 59,794 40,241

The accompanying notes are an integral part of

these Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(in thousands)

Accumulated Retained

Stockholders’

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

Balances, December 31, 2020 57,151 $ 57 $ 319,582 $ ( 2,642 ) $ 316,997

8 unchanged sentences

Share based compensation — — 1,187 — 1,187

Net income — — — 6,147 6,147

Balances, March 31, 2021 58,394 $ 58 $ 346,176 $ 3,505 $ 349,739

Stockholders’

Common stock issued upon warrant exercise 216 — 224 — 224

Common stock issued upon cashless warrant exercise 119 — — — —

Common stock issued upon exercise of options 460 1 1,729 — 1,730

Common stock issued upon cashless exercise of options 272 — — — —

Common stock issued in connection with business combinations 101 1 3,938 — 3,939

Share based compensation — — 1,508 — 1,508

Net income — — — 6,713 6,713

Balances, June 30, 2021 59,562 $ 60 $ 353,575 $ 10,218 $ 363,853

Common Stock Additional

Paid-In Capital Retained

Earnings (Deficit) Total

Stockholders’ Equity

Shares Amount

Balances, December 31, 2019 36,876 $ 37 $ 60,742 $ ( 7,970 ) $ 52,809

7 unchanged sentences

Share based compensation — — 2,209 — 2,209

Net loss — — — ( 2,094 ) ( 2,094 )

Balances, March 31, 2020 38,209 $ 38 $ 66,424 $ ( 10,064 ) $ 56,398

The accompanying notes are an integral part of

these Condensed Consolidated Financial Statements.

G ROWGENERATION CORPORATION AND SUBSIDIARIES

Common stock issued upon warrant exercise 81 — 282 — 282

Common stock issued upon cashless warrant exercise 78 — — — —

Common stock issued upon cashless exercise of options 30 — — — —

Common stock issued in connection with business combinations 108 — 705 — 705

Common stock issued for assets 10 — 67 — 67

Common stock issued for services 325 — 717 — 717

Common stock issued for share based compensation 5 — 25 — 25

Share based compensation — — 1,162 — 1,162

Net income — — — 2,574 2,574

Balances, June 30, 2020 38,846 $ 38 $ 69,382 $ ( 7,490 ) $ 61,930

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

For the Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net loss to net cash used in operating activities:

Net income $ 12,860 $ 480

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 4,971 827

3 unchanged sentences

Changes in operating assets and liabilities:

(Increase) decrease in:

Accounts and notes receivable ( 2,883 ) 652

Inventory ( 32,763 ) ( 6,154 )

Prepaid expenses and other assets ( 14,487 ) ( 2,550 )

Increase (decrease) in:

Accounts payable and accrued liabilities 23,280 6,608

8 unchanged sentences

Purchase of marketable securities ( 57,357 ) —

Purchase of furniture and equipment

Purchase of property and equipment ( 4,428 ) ( 1,280 )

Purchase of intangibles ( 1,262 ) ( 709 )

5 unchanged sentences

Net cash provided by (used in) financing activities ( 1,939 ) 745

Net decrease in cash

Net change ( 110,757 ) 1,845

Cash at the beginning of period 177,912 12,979

2 unchanged sentences

Cash paid for interest $ 6 $ 20

Common stock issued for accrued payroll $ — $ 718

Common stock issued for business combination $ 33,187 $ 1,808

Assets acquired by issuance of common stock $ — $ 168

Right to use assets acquired under new operating leases $ 19,573 $ 1,095

The accompanying notes are an integral part of

these Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

GrowGeneration Corp (the “Company”)

was incorporated on March 6, 2014 in Colorado under the name of Easylife Corp and changed its name to GrowGeneration Corp.

its principal office in Denver, Colorado.

GrowGeneration is the largest chain of hydroponic garden centers in

North America and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation

systems and accessories for hydroponic gardening.

Currently, the Company owns and operates a chain of fifty-three (53) retail hydroponic/gardening

stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and

other wholesale customers.

The Company’s plan is to continue to acquire, open and operate hydroponic/gardening stores and related

businesses throughout the United States and Canada.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

GrowGeneration Corp (the “Company”, "we", or "our") is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems and accessories for hydroponic gardening.

Currently, the Company owns and operates a chain of fifty-eight ( 58 ) retail hydroponic/gardening stores across 12 states, an online e-commerce platform, and proprietary businesses that market grow solutions through our platforms and other wholesale customers.

The Company’s plan is to continue to acquire, open and operate hydroponic/gardening stores and related businesses throughout the United States.

Basis of Presentation

The accompanying interim unaudited

Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United

States of America (“U.S.

GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include all of the information and notes required by U.S.

GAAP for complete financial statements.

the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have

been included.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.

All amounts included in the accompanying

footnotes to the consolidated financial statements, except per share data, is in thousands (000).

New Accounting Policies Adopted

During the Quarter Ended March 31, 2021

The Company classifies its

commercial paper and debt securities as marketable securities.

Marketable securities with available fair market values are stated at

fair market values.

Unrealized gains and unrealized losses on these marketable securities are reported, net of applicable income

taxes, in other comprehensive income.

Realized gains or losses on sale of marketable securities are computed using primarily the

moving average cost and reported in net income.

For the three months ended March 31, 2021, there were no significant gains or losses

All amounts included in the accompanying footnotes to the consolidated financial statements, except per share data, is in thousands (000).

Risk and Uncertainties

The COVID-19 pandemic has created significant public health concerns

as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations.

As a result, if the pandemic

persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination

at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this

The Company has experienced very minimal business interruption as a result of the COVID-19 pandemic.

We have been deemed an “essential”

business by state and local authorities in the areas in which we operate and as such have not been subject to business closures.

pandemic to date has resulted in only temporary supply chain delays of our inventory.

As events surrounding the COVID 19 pandemic can

change rapidly we cannot predict how it may disrupt our operations or the full extent of the disruption.

The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations.

As a result, if the pandemic persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time).

The Company has experienced minimal business interruption as a result of the COVID-19 pandemic.

We have been deemed an “essential” business by state and local authorities in the areas in which we operate and as such have not been subject to business closures.

The COVID-19 pandemic to date has resulted in temporary supply chain delays of our inventory.

As events surrounding the COVID-19 pandemic can change rapidly we cannot predict how it may disrupt our operations or the full extent of the disruption.

New Accounting Policies Adopted During the Six Months Ended June 30, 2021

The Company classifies its commercial paper and debt securities as marketable securities.

Marketable securities with available fair market values are stated at fair market values.

Unrealized gains and unrealized losses on these marketable securities are reported, net of applicable income taxes, in other comprehensive income.

Realized gains or losses on sale of marketable securities are computed using primarily the moving average cost and reported in net income.

For the six months ended June 30, 2021, there were no significant unrealized gains or losses recorded.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Value Measures

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange

price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market

for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to

measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities

carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the

first two are considered observable and the last is considered unobservable:

● Level 1—Quoted

prices in active markets for identical assets or liabilities.

● Level 2—Observable

inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices

in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated

by observable market data.

● Level 3—Unobservable

inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities,

including pricing models, discounted cash flow methodologies and similar techniques.

the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of

fair value requires more judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest

for instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest

level of any input that is significant to the fair value measurement.

The carrying amounts of cash and cash

equivalents, accounts receivable, available for sales securities, accounts payable and all other current liabilities approximate fair

values due to their short-term nature.

The fair value of notes receivable approximates the outstanding balance and are reviewed for impairment

at least annually.

The fair value of impaired notes receivable is determined based on estimated future payments discounted back to present

value using the notes effective interest rate.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts of cash and cash equivalents, accounts receivable, available for sales securities, accounts payable and all other current liabilities approximate fair values due to their short-term nature.

The fair value of notes receivable approximates the outstanding balance and are reviewed for impairment at least annually.

The fair value of impaired notes receivable is determined based on estimated future payments discounted back to present value using the notes effective interest rate.

Level June 30,

2021 December 31,

Cash equivalents 2 $ 67,155 $ 177,912

4 unchanged sentences

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

ACCOUNTING PRONOUNCEMENTS

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements

From time to time, the Financial Accounting

Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements.

Updates to the FASB Accounting

Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).

We have implemented all

new accounting pronouncements that are in effect and that may impact our financial statements.

We have evaluated recently issued accounting

pronouncements and determined that there is no material impact on our financial position or results of operations.

As an emerging growth company, the

Company is permitted to delay the adoption of new or revised accounting standards until such time as those standards apply to private

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements.

Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update (“ASU”).

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements.

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

As an emerging growth company, the Company is permitted to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.

The Company has chosen to take advantage of the extended transition period for complying with new or revised accounting standards.

Refer to Note 3 to the Consolidated

Financial Statements reported in Form 10-K for the year ended December 31, 2020 for recently issued accounting pronouncements that are

pending adoption.

Refer to Note 3 to the Consolidated Financial Statements reported in Form 10-K for the year ended December 31, 2020 for recently issued accounting pronouncements that are pending adoption.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU

2018-13, Fair Value Measurement (Topic 820):

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

The new guidance modifies the disclosure requirements on fair value measurements in Topic 820.

The amendments in ASU 2018-13 are effective

for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The adoption of this

new guidance, effective January 1, 2020, did not have a material impact on our Financial Statements.

In December 2019, the FASB issued ASU

2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes by removing certain exceptions to the

general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial

statements and interim recognition of enactment of tax laws or rate changes.

The standard was effective for annual reporting periods beginning

after December 15, 2020, including interim reporting periods within those periods.

There was no material impact on our consolidated financial

statements and related disclosures as a result of adopting this standard.

Disaggregation of Revenues

The following table disaggregates revenue

The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The adoption of this new guidance, effective January 1, 2020, did not have a material impact on our Financial Statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes , to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

The standard was effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those periods.

There was no material impact on our consolidated financial statements and related disclosures as a result of adopting this standard.

REVENUE RECOGNITION

The following table disaggregates revenue by source:

Three Months Ended

June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Sales at company owned stores $ 108,911 $ 40,128 $ 190,138 $ 71,912

Distribution 4,988 — 7,823 —

E-commerce sales 11,986 3,323 17,946 4,521

1 unchanged sentence

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

REVENUE RECOGNITION, continued

The opening and closing balances of

the Company’s customer trade receivables and customer deposit liability are as follows:

Customer Deposit Liability

Opening balance, 1/1/2021

Closing balance, 3/31/2021

The opening and closing balances of the Company’s customer trade receivables and customer deposit liability are as follows:

Receivables Customer Deposit Liability

Opening balance, January 1, 2021 $ 7,713 $ 5,155

Closing balance, June 30, 2021

Increase (decrease) $ 2,570 $ 1,638

Opening balance, 1/1/2020

Closing balance, 3/31/2020

Opening balance, January 1, 2020 $ 4,455 $ 2,504

Closing balance, June 30, 2020

Increase (decrease) $ ( 846 ) $ ( 169 )

Of the total amount of customer deposit

liability as of January 1, 2021, $5,155, $2,083 was reported as revenue during the three months ended March 31, 2021.

Of the total amount

of customer deposit liability as of January 1, 2020, $2,504, $1,599 was reported as revenue during the three months ended March 31, 2020.

The Company also has customer trade receivables under longer term financing

arrangements at interest rates ranging from 9% to 12% with repayment terms ranging for 12 to 18 months.

Long term trade receivables as

of March 31, 2021 and December 31, 2020 are as follows:

Of the total amount of customer deposit liability as of January 1, 2021, $ 2,873 was reported as revenue during the six months ended June 30, 2021.

Of the total amount of customer deposit liability as of January 1, 2020, $ 1,599 was reported as revenue during the six months ended June 30, 2020.

The Company also has customer trade receivables under longer term financing arrangements at interest rates ranging from 9 % to 12 % with repayment terms ranging for 12 to 18 months.

Long term trade receivables as of June 30, 2021 and December 31, 2020 are as follows:

2021 December 31,

Note receivable $ 6,172 $ 4,104

1 unchanged sentence

Notes receivable, net $ 5,906 3,812

The following table summarizes changes

in notes receivable balances that have been deemed impaired.

The following table summarizes changes in notes receivable balances that have been deemed impaired.

2021 December 31,

Note receivable $ 266 $ 1,166

2 unchanged sentences

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Marketable securities have maturities

of less than one year as of March 31, 2021.

There were no significant realized or unrealized gains or losses for the three months ended

March 31, 2021.

The components of investments, available

for sales securities, as of March 31, 2021 were as follows:

Fair Value Level

Adjusted Cost Basis

Unrealized Gain (Loss)

Recorded Basis

Commercial paper

Corporate notes and bonds

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

Marketable securities have maturities of less than one year as of June 30, 2021.

There were no significant realized or unrealized gains or losses for the six months ended June 30, 2021.

The components of investments, available for sales securities, as of June 30, 2021 were as follows:

Fair Value Level Adjusted Cost Basis Unrealized Gain (Loss) Recorded

Commercial paper Level 2 $ 9,994 $ — $ 9,994

Corporate notes and bonds Level 2 47,363 — 47,363

Marketable securities $ 57,357 $ — $ 57,357

NOTES RECEIVABLE

Notes receivable include customer trade receivables

under long terms financing arrangements and other note receivable not associated with customer transactions.

Notes receivable include customer trade receivables under long term financing arrangements and other note receivables not associated with customer transactions.

2021 December 31,

Trade receivables under longer term financing arrangements $ 5,906 $ 3,812

Note receivable, non-customer related — —

Subtotal 5,906 3,812

Less, current portion ( 4,535 ) ( 2,612 )

1 unchanged sentence

PROPERTY AND EQUIPMENT

2021 December 31,

Vehicles $ 2,256 $ 1,342

Building 1,107 477

Leasehold improvements 3,381 1,988

3 unchanged sentences

Property and equipment, net $ 10,455 $ 6,475

Depreciation expense for the three

months ended March 31, 2021 and 2020 was $659 and $331, respectively.

Depreciation expense for the three and six months ended June 30, 2021 was $ 782 thousand and $ 1.4 million, respectively.

Depreciation expense for the three and six months ended June 30, 2020 was $ 374 thousand and $ 705 thousand, respectively.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill are as follows:

March 31, 2021

June 30, 2021 December 31,

Balance, beginning of period $ 62,951 $ 17,799

Goodwill additions

Goodwill additions and measurement period adjustments 45,789 45,152

Balance, end of period $ 108,740 $ 62,951

Intangible assets on the Company’s consolidated

balance sheets consist of the following:

March 31, 2021

December 31, 2020

Intangible assets consist of the following:

June 30, 2021 December 31, 2020

Amount Accumulated

Amortization Gross

Amount Accumulated

Tradenames $ 24,184 $ ( 2,298 ) $ 13,923 $ ( 398 )

Patents, trademarks 100 ( 35 ) 100 ( 9 )

Customer relationships 18,372 ( 1,260 ) 6,297 ( 138 )

Non-competes 1,115 ( 118 ) 796 ( 22 )

Intellectual property 2,065 ( 138 ) — —

Capitalized software 2,762 ( 470 ) 1,163 ( 222 )

Amortization expense for the three months ended March 31, 2021 and

2020 was $1,395 and $28, respectively.

$ 48,598 $ ( 4,319 ) $ 22,279 $ ( 789 )

Amortization expense for the six months ended June 30, 2021 and 2020 was $ 2,135 and $ 3,530 , respectively.

Future amortization expense is as follows:

2021, remainder $ 4,714

Thereafter 3,776

Total $ 44,279

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

LONG-TERM DEBT

2021 December 31,

Long term debt is as follows:

3 unchanged sentences

Total Long-Term Debt $ 106 $ 158

Interest expense for the three months

ended March 31, 2021 and 2020 was $2 and $7, respectively.

We determine if a contract contains

a lease at inception.

Interest expense for the three months ended June 30, 2021 and 2020 was $ 4 thousand and $ 13 thousand, respectively.

Interest expense for the six months ended June 30, 2021 and 2020 was $ 6 thousand and $ 20 thousand, respectively.

We determine if a contract contains a lease at inception.

Our material operating leases consist of retail and warehouse locations as well as office space.

Our leases generally

have remaining terms of 1-5 years, most of which include options to extend the leases for additional 3 to 5-year periods.

Generally, the

lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.

Our leases generally have remaining terms of 1 - 5 years, most of which include options to extend the leases for additional 3 to 5 -year periods.

Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.

2021 December 31,

Right to use assets, operating lease assets $ 31,661 $ 12,088

1 unchanged sentence

Non-current lease liability 27,427 9,479

Weighted average remaining lease term

$ 32,891 $ 12,480

2021 June 30,

Weighted average remaining lease term 7.17 years 3.44 years

Weighted average discount rate 6.0 % 7.6 %

Six Months Ended

Operating lease costs $ 3,548 $ 1,714

2 unchanged sentences

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

LEASES, continued

The following table presents the maturity of the Company’s operating

lease liabilities as of March 31, 2021:

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2021:

2021 (remainder of the year) $ 3,769

Thereafter 15,170

Total lease payments 40,810

Imputed interest ( 7,919 )

Lease Liability at March 31, 2021

SHARE BASED PAYMENTS AND STOCK OPTIONS

The Company maintains long-term

incentive plans for employee, non-employee members of our Board of Directors and consultants.

The plans allows us to grant equity-based

compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock

awards, or a combination of awards (collectively, share-based awards).

The Company accounts for share-based

payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors

of the Company, including stock options and restricted shares.

The Company also issues share based payments in the form of common stock

warrants to non-employees.

The following table presents share-based

payment expense for the three months ended March 31, 2021 and 2020.

Lease Liability at June 30, 2021

SHARE BASED PAYMENTS

The Company maintains long-term incentive plans for employee, non-employee members of our Board of Directors and consultants.

The plans allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards).

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares.

The Company also issues share based payments in the form of common stock warrants to non-employees.

The following table presents share-based payment expense for the six months ended June 30, 2021 and 2020.

Six months ended June 30,

Restricted stock $ 1,935 $ 3,316

Stock options 559 1,986

of March 31, 2021, the Company had approximately $2.6 million of unamortized share-based compensation for option awards and restricted

stock awards, which is expected to be recognized over a weighted average period of approximately 1.75 years.

As of March 31, 2021, the

Company also had approximately $3.6 million of unamortized share-based compensation for common stock warrants issued to consultants, which

is expected to be recognized over a weighted average period of 2.75 years.

Warrants 747 —

Total $ 3,241 $ 5,302

As of June 30, 2021, the Company had approximately $ 10.4 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of approximately 3.3 years.

As of June 30, 2021, the Company also had approximately $ 3.3 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock

The Company issues shares of restricted

stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period.

The awards generally vest

on the second or third anniversary of the date of grant, subject to the employee’s continuing employment as of that date.

The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period.

The awards generally vest on the second or third anniversary of the date of grant, subject to the employee’s continuing employment as of that date.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

SHARE BASED PAYMENTS AND STOCK OPTIONS, continued

Restricted stock activity for the

three months ended March 31, 2021 is presented in the following table:

Weighted Average Grant Date Fair Value

Restricted stock activity for the six months ended June 30, 2021 is presented in the following table:

Shares Weighted Average Grant Date Fair Value

Nonvested, December 31, 2020

Nonvested, March 31, 2021

The table below summarizes all option

activity under all plans during the three months ended March 31, 2021:

Granted 201 $ 45.56

Vested ( 291 ) $ 4.39

Forfeited ( 9 ) $ 18.54

Nonvested, June 30, 2021

The table below summarizes all option activity under all plans during the six months ended June 30, 2021:

Options Shares Weight -

Price Weighted -

Term Weighted -

Outstanding at December 31, 2020

1,803 $ 3.92 3.47 $ 2.38

Granted — — —

Exercised ( 753 ) 3.05 1.65

Forfeited or expired ( 50 ) 4.16 — 2.28

Outstanding at March 31, 2021

Options vested at March 31, 2021

A summary of the status of the Company’s

outstanding stock purchase warrants for the three months ended March 31, 2021 is as follows:

Weighted Average

Outstanding at June 30, 2021

1,000 $ 4.56 3.31 $ 2.46

Options vested at June 30, 2021

774 $ 4.29 2.80 $ 3.31

A summary of the status of the Company’s outstanding stock purchase warrants for the six months ended June 30, 2021 is as follows:

Warrants Weighted Average

Exercise Price

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Exercised ( 968 ) $ 2.84

Outstanding at June 30, 2021

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

The following table sets forth the

composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three months

ended March 31, 2021 and 2020.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

EARNINGS PER SHARE

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computation for the three and six months ended June 30, 2021 and 2020.

Three Months Ended

Net income (loss)

2021 June 30,

Net income $ 6,713 $ 2,574

Weighted average shares outstanding, basic 59,061 38,617

Effect of dilutive outstanding warrants and stock options

Effect of dilution 1,162 2,399

Adjusted weighted average shares outstanding, dilutive 60,223 41,016

Basic income per shares

Dilutive income per share

Our acquisition strategy is to acquire (i) well established profitable

hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market

Basic earnings per shares $ 0.11 $ 0.07

Dilutive earnings per share $ 0.11 $ 0.06

Six Months Ended

2021 June 30,

Net income $ 12,860 $ 480

Weighted average shares outstanding, basic 58,588 38,224

Effect of dilution 1,206 2,017

Adjusted weighted average shares outstanding, dilutive 59,794 40,241

Basic earnings per shares $ 0.22 $ 0.01

Dilutive earnings per share $ 0.22 $ 0.01

Our acquisition strategy is to acquire (i) well established profitable hydroponic garden centers in markets where the Company does not have a market presence or in markets where it is increasing its market presence;

and (ii) proprietary brands and private label brands.

The Company accounts for acquisitions in accordance with ASC 805 “Business

Combinations.”

Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated

fair values, as of the acquisition date.

For all acquisitions, the preliminary allocation of the purchase price was based upon a preliminary

valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized.

The Company has made any adjustments to the preliminary valuations on four of the eight acquisition based on valuation analysis prepared

by independent third-party valuation consultants.

The acquisitions for which an independent third-party valuation analysis has been competed

includes Agron, LLC, Charcoir, Grow Warehouse and San Diego Hydro.

The remaining four valuations, Aquarius, 55 Hydro, Grow Depot Maine

and Indoor Garden, are expected to be completed by June 30, 2021.

Any changes to these estimates may have a material impact on the Company’s

operating results or financial position.

All acquisition costs are expensed as incurred and recorded in general and administrative expenses

in the consolidated statements of operations.

Acquisitions during the three months

ended March 31, 2021.

On January 25, 2021, the Company purchased

the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment and

indoor gardening supply stores serving the Seattle and Tacoma, Washington area.

The total consideration for the purchase of Garden

& Lighting was approximately $1.7 million, including $1.2 million in cash and common stock valued at approximately $0.5 million.

goodwill of approximately $0.8 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established

market for the Company.

On February 1, 2021, the Company purchased

the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta,

The total consideration for the purchase of Grow Depot Maine was approximately $2.1 million, including $1.7 million in

cash and common stock valued at approximately $0.4 million.

Acquired goodwill of approximately $1.3 million represents the value expected

to rise from organic growth and an opportunity to expand into a well-established market for the Company.

The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated fair values, as of the acquisition date.

For all acquisitions, the preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized.

The Company has made adjustments to the preliminary valuations of the acquisition based on valuation analysis prepared by independent third-party valuation consultants.

All acquisition costs are expensed as incurred and recorded in general and administrative expenses in the consolidated statements of operations.

Acquisitions during the six months ended June 30, 2021.

On January 25, 2021, the Company purchased the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment and indoor gardening supply stores serving the Seattle and Tacoma, Washington area.

The total consideration for the purchase of Garden & Lighting was approximately $ 1.7 million, including $ 1.2 million in cash and common stock valued at approximately $ 0.5 million.

Acquired goodwill of approximately $ 0.8 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On February 1, 2021, the Company purchased the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta, Maine.

The total consideration for the purchase of Grow Depot Maine was approximately $ 2.1 million, including $ 1.7 million in cash and common stock valued at approximately $ 0.4 million.

Acquired goodwill of approximately $ 1.3 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

ACQUISITIONS, continued

On February 15, 2021, the Company purchased

the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores in

Colorado (3) and Oklahoma (1).

The total consideration for the purchase of Grow Warehouse LLC was approximately $17.8 million,

including $8.1 million in cash and common stock valued at approximately $9.7 million.

Acquired goodwill of approximately $9.6 million

represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On February 22, 2021, the Company purchased

the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic

garden stores in San Diego, CA.

The total consideration for the purchase of San Diego Hydroponics was approximately $9.3 million,

including $4.8 million in cash and common stock valued at approximately $4.5 million.

Acquired goodwill of approximately $5.6 million

represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 12, 2021, the Company purchased

the assets of Charcoir Corporation, who sells an RHP-certified growing medium made from the highest-grade

coconut fiber.

The total consideration for the purchase of Charcoir was approximately $16.4 million, including $9.9 million in

cash and common stock valued at approximately $6.5 million.

Acquired goodwill of approximately $7.1 million represents the value expected

to rise from organic growth and an opportunity to expand into a well-established distribution market for the Company of a proprietary

On March 15, 2021, the Company purchased

the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA.

The total consideration for the purchase of 55 Hydroponics was approximately $6.5 million, including $5.4 million in cash and common stock

valued at approximately $1.1 million.

Acquired goodwill of approximately $3.8 million represents the value expected to rise from organic

growth and an opportunity to expand into a well-established market for the Company.

On March 15, 2021, the Company purchased

the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA.

consideration for the purchase of Aquarius was approximately $3.6 million, including $2.4 million in cash and common stock valued at approximately

$1.2 million.

Acquired goodwill of approximately $1.6 million represents the value expected to rise from organic growth and an opportunity

to expand into a well-established market for the Company.

On March 19, 2021, the Company purchased

the assets of Agron, LLC, an online seller of growing equipment.

The total consideration for the purchase of Agron was approximately

$11.3 million, including $6 million in cash and common stock valued at approximately $5.3 million.

Acquired goodwill of approximately

$8.3 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established e-commerce

market for the Company targeting the commercial customer.

On February 15, 2021, the Company purchased the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores in Colorado (3) and Oklahoma (1).

The total consideration for the purchase of Grow Warehouse LLC was approximately $ 17.8 million, including $ 8.1 million in cash and common stock valued at approximately $ 9.7 million.

Acquired goodwill of approximately $ 11.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On February 22, 2021, the Company purchased the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and organic garden stores in San Diego, CA.

The total consideration for the purchase of San Diego Hydroponics was approximately $ 9.3 million, including $ 4.8 million in cash and common stock valued at approximately $ 4.5 million.

Acquired goodwill of approximately $ 5.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 12, 2021, the Company purchased the assets of Charcoir Corporation, who sells an RHP-certified growing medium made from the highest-grade coconut fiber.

The total consideration for the purchase of Charcoir was approximately $ 16.4 million, including $ 9.9 million in cash and common stock valued at approximately $ 6.5 million.

Acquired goodwill of approximately $ 6.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established distribution market for the Company of a proprietary brand.

On March 15, 2021, the Company purchased the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA.

The total consideration for the purchase of 55 Hydroponics was approximately $ 6.5 million, including $ 5.4 million in cash and common stock valued at approximately $ 1.1 million.

Acquired goodwill of approximately $ 3.9 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 15, 2021, the Company purchased the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA.

The total consideration for the purchase of Aquarius was approximately $ 3.6 million, including $ 2.4 million in cash and common stock valued at approximately $ 1.2 million.

Acquired goodwill of approximately $ 1.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

On March 19, 2021, the Company purchased the assets of Agron, LLC, an online seller of growing equipment.

The total consideration for the purchase of Agron was approximately $ 11.3 million, including $ 6 million in cash and common stock valued at approximately $ 5.3 million.

Acquired goodwill of approximately $ 8.7 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established e-commerce market for the Company targeting the commercial customer.

On April 19, 2021, the Company purchased the assets of Grow Depot LLC ("Down River Hydro"), a hydroponic and indoor gardening supply store in Brownstown, MI.

The total consideration for the purchase of Down River Hydro was approximately $ 4.4 million, including approximately $ 3.2 million in cash and common stock valued at approximately $ 1.2 million.

Acquired goodwill of approximately $ 2.1 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

On May 24, 2021, the Company purchased the assets of The Harvest company ("Harvest"), a northern California-based hydroponic supply center and cultivation design innovator with stores in Redding and Trinity County.

The total consideration for the purchase if Harvest was approximately $ 8.3 million, including approximately $ 5.6 million in cash and common stock valued at approximately $ 2.8 million.

Acquired goodwill of approximately $ 4.6 million represents the value expected to rise from organic growth and an opportunity to expand into a well established market for the Company.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

ACQUISITIONS, continued

The table below represents the allocation

of the purchase price to the acquired net assets during the three months ended March 31, 2021.

San Diego Hydro

Grow Warehouse

Grow Depot Maine

Indoor Garden

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

Inventory $ — $ 957 $ 780 $ 839 $ 1,400

Prepaids and other current assets 29 12 29 534 36

Furniture and equipment 46 63 50 — 315

Liabilities — — — — —

Operating lease right to use asset 87 — 853 — 970

1 unchanged sentence

Customer relationships 832 339 809 5,712 605

The table below represents the consideration

paid for the net assets acquired in business combinations.

San Diego Hydro

Grow Warehouse

Indoor Garden

The following table discloses the date

of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition

to the period ended March 31, 2021.

San Diego Hydro

Grow Warehouse

Grow Depot Maine

Indoor Garden

Trade name 1,530 485 870 1,099 1,192

Non-compete 139 — 26 — 6

Intellectual property — — — 2,065 —

Goodwill 8,673 1,702 3,915 6,119 5,728

Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282

Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

Inventory $ 2,448 $ 326 $ 372 $ 824 $ 1,204 $ 9,150

Prepaids and other current assets 30 3 — 3 7 683

Furniture and equipment 250 25 94 50 100 993

Liabilities ( 169 ) — — — — ( 169 )

Operating lease right to use asset 94 91 129 — — 2,224

Operating lease liability ( 94 ) ( 91 ) ( 129 ) — — ( 2,224 )

Customer relationships 1,256 549 210 634 1,016 11,962

Trade name 2,748 344 353 698 1,392 10,711

Non-compete 94 36 2 16 — 319

Intellectual property — — — — — 2,065

Goodwill 11,122 866 661 2,126 4,606 45,518

Total 17,779 2,149 1,692 $ 4,351 $ 8,325 $ 81,232

The table below represents the consideration paid for the net assets acquired in business combinations.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

Cash $ 5,973 $ 2,331 $ 5,347 $ 9,902 $ 4,751

Common stock 5,276 1,227 1,132 6,466 4,531

Total $ 11,249 $ 3,558 $ 6,479 $ 16,368 $ 9,282

Grow Warehouse Grow

Depot Maine Indoor Garden Down River Hydro Harvest Total

Cash $ 8,100 $ 1,738 $ 1,165 $ 3,177 $ 5,561 $ 48,045

Common stock 9,679 411 527 1,174 2,764 33,187

Total $ 17,779 $ 2,149 $ 1,692 $ 4,351 $ 8,325 $ 81,232

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement for the period ended June 30, 2021.

Agron Aquarius 55 Hydro Charcoir San Diego Hydro

Acquisition date

3/19/2021 3/15/2021 3/15/2021 3/12/2021 2/22/2021

Revenue $ 6,105 $ 2,684 $ 2,222 $ 1,880 $ 3,446

Net Income $ 324 $ 365 $ 314 $ 518 $ 547

Grow Warehouse Grow Depot Maine Indoor Garden Down River Hydro Harvest Total

Acquisition date

2/15/2021 2/1/2021 1/25/2021 4/19/2021 5/24/21

Revenue $ 6,753 $ 2,779 $ 2,308 $ 1,200 $ 1,489 $ 5,986

Net Income $ 1,297 $ 555 $ 433 $ 176 $ 268 $ 905

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

ACQUISITIONS, continued

The following represents the pro forma

consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period

for the quarter ended March 31, 2021 and 2020.

March 31, 2021

March 31, 2020

Acquisitions during the three months

ended March 31, 2020.

On February 26, 2020 we acquired certain assets of Health & Harvest

LLC in a transaction valued at approximately $2.85 million.

Acquired goodwill of approximately $1.1 million represented the value expected

to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Cash consideration was funded

from the Company’s existing working capital.

The table below represents the allocation

of the purchase price to the acquired net assets during the three months ended March 31, 2020.

Health & Harvest LLC

The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the quarter ended June 30, 2021 and 2020.

Three Months Ended Six Months Ended

June 30, 2021

(Unaudited) June 30, 2021

Revenue $ 130,504 $ 229,599

Net income $ 12,446 $ 19,849

Three Months Ended Six Months Ended

June 30, 2020

(Unaudited) June 30, 2020

Revenue $ 40,501 $ 90,126

Net income $ 1,849 $ 2,352

Acquisitions during the six months ended June 30, 2020.

On February 26, 2020 we acquired certain assets of Health & Harvest LLC in a transaction valued at approximately $ 2.85 million.

Acquired goodwill of approximately $ 1.1 million represented the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Cash consideration was funded from the Company’s existing working capital.

On June 16, 2020 we acquired certain assets of H2O Hydroponics, LLC in a transaction valued at approximately $ 2.0 million.

Acquired goodwill of approximately $ 1.0 million represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Cash consideration was funded from the Company's existing working capital.

The table below represents the allocation of the purchase price to the acquired net assets during the six months ended June 30, 2020.

H2O Hydroponics LLC Health & Harvest LLC Total

Inventory $ 498 $ 1,054 $ 1,552

Prepaids and other current assets 4 — 4

Furniture and equipment 50 51 101

2 unchanged sentences

Customer relationships 150 255 405

The table below represents the consideration

paid for the net assets acquired in business combinations.

Health & Harvest LLC

The following table discloses the date

of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition

to the period ended March 31, 2020.

Health & Harvest LLC

Acquisition date

Trade name 234 357 591

Non-compete 43 6 49

Goodwill 1,008 1,130 2,138

Total $ 1,987 $ 2,853 $ 4,840

The table below represents the consideration paid for the net assets acquired in business combinations.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial

March 31, 2021

ACQUISITIONS, continued

The following represents the pro forma

consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period

for the three months ended March 31, 2020 and 2019.

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

H2O Hydroponics LLC Health & Harvest LLC Total

Cash $ 1,282 $ 1,750 $ 3,032

Common stock 705 1,103 1,808

Total $ 1,987 $ 2,853 $ 4,840

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition to the period ended June 30, 2020.

H2O Hydroponics LLC Health & Harvest LLC Total

Acquisition date 6/26/20 2/26/2020

Revenue $ 227 $ 2,300 $ 2,527

Earnings $ 28 $ 462 $ 490

Pro forma consolidated income statement:

March 31, 2020

Three Months Ended Six Months Ended

June 30, 2019 June 30, 2019

Revenue $ 21,759 $ 37,122

Earnings $ 1,149 $ 1,465

RELATED PARTIES

The Company has engaged with a firm that employs an immediate family member of an officer of the Company as partner.

The firm provides certain legal services.

Amounts paid for to that firm in total was approximately $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2021, there was no outstanding balance due.

SUBSEQUENT EVENTS

The Company has evaluated events and

transaction occurring subsequent to March 31, 2021 up to the date of this filing of these consolidated financial statements.

These statements

contain all necessary adjustments and disclosures resulting from that evaluation.

For all acquisitions subsequent to

the end of the quarter, the Company’s initial accounting for the business combination has not been completed because the valuations

have not yet been received from the Company’s independent valuation firm.

On April 19, 2021 the Company purchased

the assets of Grow Depot LLC (“Down River Hydro”), a hydroponic and indoor gardening

supply store in Brownstown, MI.

The total consideration for the purchase of Down River Hydro was approximately $4.4 million, including

approximately $3.2 million in cash and 25,895 shares of common stock valued at approximately $1.2 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction

with our consolidated financial statements and related notes that appear elsewhere in this report as well as our Annual Report on Form

10-K for the year ended December 31, 2020 filed with the SEC on March 29, 2021.

In connection with, and because we desire to take advantage

of, the “safe harbor”

provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain

forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf,

whether or not in future filings with the SEC.

Forward looking statements are statements not based on historical information and which

relate to future operations, strategies, financial results or other developments.

Forward looking statements, particularly those

identified with the words, “anticipates,”

“believes,”

“expects,”

“plans,”

“intends,”

“objectives,”

and similar expressions, are necessarily based upon estimates and assumptions that are inherently subject to

significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which,

with respect to future business decisions, are subject to change.

These uncertainties and contingencies can affect actual results and

could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf.

any obligation to update forward looking statements, except as required by law.

GrowGeneration Corp.

(together with all of

its wholly-owned subsidiaries, collectively “GrowGeneration”

or the “Company”) was incorporated in Colorado

in 2014 and is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of

nutrients, growing media, advanced indoor and greenhouse lighting, environmental control systems and accessories for hydroponic

GrowGeneration also owns and operates e-commerce platforms, www.growgeneration.com and www.agron.io, Canopy Crop

Management Corp, CharCoir Inc, and several proprietary private-label brands across multiple product categories from LED lighting to

nutrients and additives and environmental control systems for indoor cultivation.

GrowGeneration sell thousands of products, including

nutrients, growing media, advanced indoor and greenhouse lighting, environmental control systems, vertical benching and accessories for

hydroponic gardening, as well as other indoor and outdoor growing products, that are designed and intended for growing a wide range of

In addition, vertical farms producing organic fruits and vegetables also utilize hydroponics due to a rising shortage of farmland

as well as environmental vulnerabilities including drought, other severe weather conditions and insect pests.

Our retail operations are driven by a wide selection

of all hydroponic products, service and solutions driven staff and pick, pack and ship distribution and fulfillment capabilities.

approximately 590 employees, a majority of them we have branded as “Grow Pros.”

Currently, our operations span over 865,000

square feet of retail and warehouse space.

We operate our business through the following

business units:

53 operating hydroponic/gardening centers focused on serving growers and cultivators.

Sales to commercial customers, including large multi-state operators and cultivators.

E-Commerce/Omni-channel :

Our e-commerce operation, includes GrowGeneration.com and Agron.io, a business-to-business (B2B) online portal for commercial growers.

GrowGeneration.com is currently adding “Buy online/Pick up in store”

same day pick up service.

Proprietary Brands and Private Label:

GrowGeneration sells a variety of products, including nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems, vertical benching, environmental control systems and accessories for hydroponic gardening.

Competitive Advantages

As the largest chain of hydroponic garden centers

by revenue and number of stores in the United States based on management’s estimates, we believe that we have the following core

competitive advantages over our competitors:

We offer a one-stop shopping experience to all types of growers by providing “selection, service, and solutions”;

We provide end-to-end solutions for our commercial customers from capex built-out to consumables to nourish their plants;

We have a knowledge-based sales team, all with horticultural experience;

We offer the options to transact online, in store, or buy online and pick up;

We consider ourselves to be a leader of the products we offer, from launching new technologies to the development of our private label products;

We have a professional team for mergers and acquisitions to acquire and open new locations and successfully add them to our company portfolio;

We offer a program of issuing credit to licensed commercial customers based on a credit evaluation process.

Growth Strategy - Store Acquisitions

and New Store Openings

Core to our growth strategy is to expand the number

of our retail garden centers throughout North America.

The hydroponic retail landscape is fragmented, which allows us to acquire the “best

of breed”

hydroponic operations.

In addition to the 12 states we are currently operating in, we have identified new market opportunities

in states that include Ohio, Illinois, Pennsylvania, New York, New Jersey, Mississippi and Missouri.

In 2020, we opened a second hydroponic/gardening

center in Tulsa, Oklahoma, a 40,000 square feet store operation and fulfillment center, and completed eight (8) acquisitions, adding 14

new locations in 2020.

The Company acquired 14 new locations in the first quarter of 2021, one additional location in April 2020 and has

an active target pipeline of acquisitions which are planned to close in 2021.

R ESULTS OF OPERATIONS

Comparison of the three months ended March

31, 2021 and 2020.

The following table presents certain consolidated

statement of operations information and presentation of that data as a dollar and percentage change from year-to-year.

Cost of goods sold

Store operating costs

Income from store operation

Corporate operating expenses

Operating income

Other income (expense)

Net income, before taxes

Provision for income taxes

Net revenue for the three months ended March

31, 2021 was approximately $90 million, compared to $33 million for the three months ended March 31, 2020 an increase of

approximately $57 million or 173%.

This increase included $41.4 million of additional quarterly revenue from 2020 and 2021

acquisitions and $14.5 million of additional revenue from same store sales performance.

Cost of Goods Sold

Cost of goods sold for the three months ended

March 31, 2021 was approximately $64.6 million, compared to approximately $24.0 million for the three months ended March 31, 2020, an increase

of approximately $40.6 million or 169%.

The increase in cost of goods sold was primarily due to the 173% increase in sales comparing the

three months ended March 31, 2021 to the three months ended March 31, 2020.

Gross profit was approximately $25.4 million for

the three months ended March 31, 2021, compared to approximately $8.9 million for the three months ended March 31, 2020, an increase of

approximately $16.4 million or 184%.

The increase in gross profit is primarily related to the 173% increase in revenues comparing the

quarter ended March 31, 2021 to the quarter ended March 31, 2020.

Gross profit as a percentage of revenues was 28.2% for the three months

ended March 31, 2021, compared to 27.1% for the three months ended March 31, 2020.

The increase in the gross profit margin percentage

is primarily due to higher increases in revenues from both private label products and distributed products which were 6.2% of revenues

for the quarter ended March 31, 2021 and less than 1% of revenues for the quarter ended March 31, 2020.

Operating Expenses

Operating expenses are comprised of store operations,

selling, general, and administrative and depreciation and amortization.

Operating costs were approximately $17.6 million for the three

months ended March 31, 2021 and approximately $11.1 million for the three months ended March 31, 2020, an increase of approximately $6.6

million or 60%.

Store operating costs were approximately $8.2 million for the three

months ended March 31, 2021, compared to $3.6 million for the quarter ended March 31, 2020, an increase of $4.6 million or 125%.

in store operating costs was directly attributable to the 173% increase in revenues, the addition of twenty-five (25) locations that were

added after March 31, 2020, and two (2) locations added during the quarter ended March 31, 2020 that were open for the entire quarter

ended March 31, 2021.

Total corporate overhead was approximately $9.5 million for the

three months ended March 31, 2021, compared to $7.4 million for the quarter ended March 31, 2020, an increase of $2.1 million or 28%.

Selling, general, and administrative costs were approximately $7.4 million for the three months ended March 31, 2021, compared to approximately

$7.1 million for the three months ended March 31, 2020.

Salaries expense increased to $4.0 million from $1.8 million primarily due to

an increase in corporate staff and general and administrative expenses increased to $2.1 million from $1.2 million to support expanding

These increases were partially offset by a decrease in share-based compensation to $1.3 million from $4.1 million primarily

due to new executive compensation agreements effective January 1, 2020 that had front loaded vesting provisions for shares and options

that vested January 1, 2020 for which the remaining vesting was over a two-year period.

Net income for the three months ended March 31,

2021 was approximately $6.1 million, compared to a net loss of approximately $2.1 million for the three months ended March 31, 2020, a

positive change of approximately $8.2 million.

Operating Activities

Net cash provided by operating activities for three months ended

March 31, 2021 was approximately $0.7 million compared to $0.8 million for the three months ended March 31, 2020.

Net cash used in investing activities was approximately $82.7

million for the three months ended March 31, 2021 and approximately $2.8 million for the three months ended March 31, 2020.

activities in 2021 were primarily attributable to store acquisition ($39.3 million), purchase of marketable securities ($41.1 million),

vehicles and store equipment purchases ($1.7 million) and intangible asset purchases $(0.6 million).

Investing activities for the three

months ended March 31, 2020 were primarily related to store acquisitions $(1.8) million, the purchase of vehicles and store equipment

to support new store operations of $(0.7) million and intangible assets ($0.4 million).

Net cash used in financing

activities for the three months ended March 31, 2021 was approximately $3.9 million and was primarily attributable to stock redemptions.

Net cash provided by financing activities for three months ended March 31, 2020 was $0.5 million and was primarily from proceeds from

the sale of common stock and exercise of warrants.

Use of Non-GAAP Financial

The Company believes

that the presentation of results excluding certain items in “Adjusted EBITDA,”

such as non-cash equity compensation charges,

provides meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting

The Company uses these non-GAAP measures for internal planning and reporting purposes.

These non-GAAP measures are not in accordance

with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income

per share prepared in accordance with generally accepted accounting principles.

Set forth below is a reconciliation of Adjusted

EBITDA to net income (loss):

Three Months Ended

March 31, 2021

March 31, 2020

Depreciation and Amortization

Share based compensation (option compensation, warrant compensation, stock issued for services)

Adjusted EBITDA

Adjusted EBITDA per share, basic

Adjusted EBITDA per share, diluted

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2021, we had working capital of

approximately $194 million, compared to working capital of approximately $223 million as of December 31, 2020, a decrease of approximately

The decrease in working capital from December 31, 2020 to March 31, 2021 was due primarily to eight (8) business acquisition

completed during the quarter ended March 31, 2021 for which the cash consideration was approximately $39.3 million.

At March 31, 2021,

we had cash and cash equivalents of approximately $92 million and available for sale debt securities of $41.1 million.

Currently, we have

no demands, commitments or uncertainties that would reduce our current working capital.

Our core strategy continues to focus on expanding

our geographic reach across the United States through organic growth and acquisitions.

Based on our strategy we may need to raise

additional capital in the future through equity offerings and/or debt financings.

We believe that some of our store acquisitions

and new store openings can come from cash flow from operations.

We anticipate that we

may need additional financing in the future to continue to acquire and open new stores and related businesses.

To date we have financed

our operations through the issuance and sale of common stock, convertible notes and warrants.

Critical Accounting

Policies, Judgements and Estimates

For a summary of the

Company’s significant accounting policies, please refer to Note 2 to our Consolidated Financial Statements filed on our Form 10-K

for the year ended December 31, 2020.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements

(as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our

financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK.

We are a smaller reporting company and are not

required to provide the information under this item pursuant to Regulation S-K.

The Company has evaluated events and transaction occurring subsequent to June 30, 2021 up to the date of this filing of these consolidated financial statements.

These statements contain all necessary adjustments and disclosures resulting from that evaluation.

For all acquisitions subsequent to the end of the quarter, the Company’s initial accounting for the business combination has not been completed because the valuations have not yet been received from the Company’s independent valuation firm.

On July 1, 2021, the Company purchased the assets of Aqua Serene, an indoor/outdoor garden center with stores in Eugene and Ashland, Oregon.

The total consideration for the purchase was $ 10.0 million, including approximately $ 7.7 million in cash and 46,554 shares of common stock valued at approximately $ 2.3 million.

On July 3, 2021, the Company purchased the assets of Mendocino Greenhouse & Garden Supply, Inc, a Northern California-based hydroponic garden center located in Mendocino, California.

The total consideration for the purchase was approximately $ 4.0 million.

GrowGeneration Corporation and Subsidiaries

Notes To Unaudited Condensed Consolidated Financial Statements

June 30, 2021

On July 27, 2021, the Company entered into a series of asset purchase agreements (the “Purchase Agreements”) through its wholly-owned subsidiary, GrowGeneration Michigan Corp., to purchase the assets from subsidiaries of HGS Hydro (“HGS Hydro”) with six stores across the State of Michigan and a seventh store to open in the fall of 2021.

This acquisition is expected to close before the end of 2021 fiscal year-end.

As consideration for the assets, the Company agreed to pay HGS Hydro an aggregate purchase price of approximately $ 72.2 million which includes $ 55.2 million in cash and approximately $ 17.0 million in shares of the Company's restricted common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements